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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.K. PANDA
the work order. The same, in my opinion, is not for violation of any statutory law, but, will amount to compensatory in nature. I find the Pune bench of the Tribunal in the case of Shanti Commodities (supra) has held that penalties paid for violation of rules laid by Forward Market Commission being in the nature of civil liability similar to compounding fees and not fee for any serious violation of provisions of law was to be allowed u/s 37(1) of the Act. In view of the above discussion, I am of the considered opinion that the ld.CIT(A) is not justified in sustaining the addition made by the Assessing Officer amounting to Rs.37,654/-. Accordingly, the order of the CIT(A) on this issue is set aside and the ground raised by the assessee is allowed.
Ground of appeal No.3 raised by the assessee reads as under:-
“The action of the ld.CIT(A) in confirming the action of the ld. Assessing Officer in disallowing the sum of Rs.69,741/- being the amount of Pooja Expenses is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case.”
Facts of the case, in brief, are that the Assessing Officer, during the course of assessment proceedings, noted that the assessee company has claimed Pooja expenses of Rs.69,741/- which are related with the business and cannot be said to be incurred wholly and exclusively for the business. Relying on various decisions, the Assessing Officer disallowed an amount of Rs.69,741/- and added the same to the total income.
Before the CIT(A), it was submitted that the above mentioned expenses brought harmony in the business and was incurred on day-to-day Pooja in the office, expenses of Pooja on 5th anniversary of the company and pooja performed in the temples for the growth of the company. The decision in the case of CIT vs. Dalmia Cement was brought to the notice of the CIT(A) wherein the Hon'ble High Court allowed such expenses.
The ld.CIT(A) was not satisfied with the arguments advanced by the assessee.
He observed that in the case of Dalmia Cement (supra), the Pooja was held at the temple near to the factory premises and was frequented by the workers who lived near the temple and worked in the factory. However, no such fact was brought out in the instant case either by the Assessing Officer or by the assessee. He, therefore, rejected the contention of the assessee and dismissed the grounds raised before him.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.
The ld. counsel for the assessee, referring to the decision of the Hon'ble Supreme Court in the case of SA Builders reported in 288 ITR 1, submitted that this expenditure should be allowed on account of commercial expediency. Referring to the decision of the Hon'ble Gujarat High Court in the case of Commercial Ahmedabad Mills Co. Ltd. vs. CIT, 204 ITR 505, he submitted that under identical circumstances the Hon'ble High Court has allowed the claim of the assessee on account of Pooja expenses. He accordingly submitted that the order of the CIT(A) should be set aside and the ground raised by the assessee should be allowed.
The ld. DR, on the other hand, heavily relied on the orders of the Assessing Officer and the CIT(A).
I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I find the Assessing Officer in the instant case, disallowed an amount of Rs.69,741/- claimed by the assessee on account of Pooja expenses on the ground that it is not a welfare measure and in no way connected with the business of the assessee and, therefore, cannot be said to be wholly and exclusively for the business of the assessee. I find the ld.CIT(A) upheld the action of the Assessing Officer. It is the submission of the ld. counsel that such expenses bring harmony between the management and the employees and are for commercial expediency. Therefore, it should be allowed as a deduction. It is also his submission that in view of the decision of Hon'ble Gujarat High Court in the case of Commercial Ahmedabad Mills Co. Ltd. (supra) wherein it has been held that the expenditure incurred being neither personal nor purely religious in nature and the expenses were incurred in the interest of business of the assessee, the same should be allowed as a deduction. A perusal of the order of the Hon'ble Gujrat High Court shows that the Hon'ble High Court in the said decision has held that it is for the assessee to decide as to what is in the interest of the business and, therefore, if the nexus between the expenditure and business of the assessee or welfare of a class of its workers is established, then, it cannot be said that the expenditure incurred by it is not for the purpose of business. However, the assessee, in the instant case, has failed to prove the nexus. While the expenses incurred on the occasion of its fifth anniversary day is an allowable expenditure, however, the day-to-day pooja expenses in the office of the company, in my opinion, cannot be allowed as an allowable expenditure. However, 9 the nature of bifurcation is not available. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to give a bifurcation and the puja expenses incurred on the fifth anniversary day of the company may be allowed as an expenditure whereas the day-to-day pooja expenses cannot be allowed as an expenditure. The Assessing Officer shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. I hold and direct accordingly. This ground raised by the assessee is accordingly allowed for statistical purposes.
The other grounds in the grounds of appeal being general in nature, are being dismissed.
In the result, the appeal filed by the assessee is allowed for statistical purposes. The decision was pronounced in the open court on 26.09.2019.